The saga of Iraqi oil export sanctions has added more chapters.
Foreign firms that are discussing oil projects in Iraq, to be undertaken when U.N. sanctions are lifted, also are being asked to help repair oil production and export facilities damaged in the 1991 Persian Gulf war.
Middle East Economic Survey (MEES) says Elf, Total, Lukoil, and Agip sent teams to assess oil field damage and repair needs at Baghdad's request.
"The general consensus appears to be that when sanctions are removed, Iraq could reasonably quickly raise production to around 2 million b/d, with exports in the region of 1.5 million b/d," MEES said.
"However, it is reckoned that it would take Iraq at least 3 years to restore productive capacity to its pre-August 1990 level of some 3.5 million b/b/d."
MEES claims negotiations are furthest along with Elf/Total to develop Majnoon and Nahr Omar fields, Lukoil West Qurna field, and Agip Nasariyah field. Iraq currently is thought to be producing 500,000-710,000 b/d. Under U.N. rules, Iraq can export 50,000 b/d of crude and 25,000 b/d of refined products to Jordan to earn money for medicine and food.
The Clinton administration has accused Iraq of illegally selling as much as 80,000-100,000 b/d of oil through Iran and Turkey for about half the world market price at $8/bbl. It cited other reports that put the illegal volume as high as 200,000 b/d. Iran and Iraq denied the reports.
Meantime, the Clinton administration may lend support to Republican efforts to close a loophole in the ban on U.S. companies buying oil from Iran.
A bill proposed by Sen. Alfonse D'Amato (R-N.Y.) would halt the practice of U.S. companies buying Iranian oil and shipping it to foreign subsidiaries for sale outside the U.S.
U.S petroleum companies continue to make inroads into the international electric power sector. Coastal Corp.'s Coastal Power Production Co. signed a letter of intent to form a joint venture to build and operate a power plant with capacity of as much as 120,000 kw in Wuxi City, China.
A first phase calls for a 40,000-48,000 kw plant, with construction to begin as early as April, take about 4 months, and cost $25-40 million. A second phase could come as early as 1996 and more than double output.
Mobil has created a business unit to develop independent power projects worldwide. Its current focus is the Pacific Rim and South America.
Mobil Chairman Lucio Noto said, "Mobil's goal is to be a major player in the independent power business ... through the addition of profitable new markets for Mobil's natural gas and liquid fuels."
The public health controversy over MTBE use in reformulated gasoline in the U.S. continues to grow (OGJ, Feb. 13, p. 17).
EPA recommends ethanol blends as an effective alternative to MTBE in RFG where consumers are reporting ill health effects and blaming them on RFG.
Hundreds of people showed up at an open meeting in Milwaukee last week to protest EPA:s RFG program.
The previous week, EPA Administrator Carol Browner denied a request by Wisconsin Gov. Tommy Thompson to suspend six counties in southeastern Wisconsin, including Milwaukee, from the RFG program until Apr. 1.
Aside from the damage it's causing the RFG program, the health controversy may lend momentum to conservative forces in Congress seeking to roll back major portions of the Clean Air Act, which House Speaker Newt Gingrich recently declared a failure.
States' growing opposition to the RFG program could spread to the rest of CAA regulations that soon will kick in, notably the unpopular tougher emissions inspections and maintenance programs.
Weak gas prices are spawning shut-ins and operating cuts in Canada.
Alberta Energy Co. will shut in as much as 13%, or 50 MMcfd, of its natural gas production if sagging prices continue in 1995. AEC will sell gas only where it has contractual and transportation deals outside Alberta and will buy spot gas for storage. AEC plans to cut 1995 capital spending by about $30 million (Canadian) to $300 million. Meantime, Canadian Hunter Exploration will shut in about 60 MMcfd, or 20%, of its production and cut planned 1995 capital spending of about $120 million by as much as 50%. Canadian Hunter plans "significant" cuts in its staff of about 230 but won't specify the number.
Indonesia continues to press LNG expansion. Pertamina in March will begin construction of the seventh LNG train at Bontang, with completion scheduled for mid-1997. The $512 million train will have capacity of 2.6 million metric tons/year of LNG intended as contract volumes to Japan, South Korea, and Taiwan. Meantime, Pertamina claims to have lined up 24 Japanese buyers of LNG from the proposed $35 billion Natuna gas project. Pertamina says the buyers also are interested in financing gas liquefaction facilities at Natuna, to be developed with an Exxon unit. Pertamina contends the commitment by Japanese buyers, with negotiations to get under way in March, will enable it and Exxon to advance the project construction start to 1997 from the earlier planned 2004.
Foreign entities will replace Moscow in monitoring Russian oil and gas exports, following the Jan. 1 lifting of export quotas and licenses.
Moscow daily Commersant reports that foreign companies will have to bid for the new role of export supervisors, with winners issuing product quality certificates required for export approval.
Moscow wants to halt illegal oil sales and its related hard currency losses that are caused by rigging export contract costs. However, some Russian analysts fear the new system will add to bureaucratic delays and create fresh opportunities for corruption, with oil exporters ultimately suffering the most. In any event, exporters still must go through the 14 trading organizations that officials say will be easier to monitor through the new system.
Russia and Poland have agreed to lay a $2.5 billion pipeline to transport Russian gas to Germany through Poland. The deal calls for laying a 650 km pipeline to export 2.4 tcf/year from Russia's Yamal Peninsula by 2010.
Under the deal, Poland could purchase 490 bcf/year via the pipeline, which will be owned by a Russo-Polish venture. Work on the first 102 km section of the pipeline, to link Poland's western frontier with its gas grid, is to start this spring. Russia supplies Poland two thirds of its 350 bcf/year of gas demand.
Azerbaijan reportedly is talking to Exxon, Royal Dutch/Shell, Mobil, Elf, and Agip about participating in the $8 billion development of Caspian oil fields. Baku is short of cash to fund its 20% stake in the project. Eight other firms hope to begin production from Chirag field in mid-1996 (OGJ, Jan. 30, p. 31).
BP has its first potentially commercial oil discovery off Viet Nam.
BP's Block 5.2 Kim Cuong Tay wildcat flowed 5,075 b/d of crude in the South Con Son basin next to a block where BP found two major natural gas fields last year (OGJ, Sept. 26, 1994, p. 40). Tests disclosed last week also yielded natural gas at a rate of 15.4 MMcfd. Plans call for interpreting seismic data from the block another 2 months before moving on a development decision. Operator BP holds a two thirds interest in partnership with Statoil one third.
Exploration off Ireland continues to heat (OGJ, Feb. 13, p. 24).
Chevron is taking options on three exploration licenses off southern Ireland and plans a wildcat on one of the blocks this year, citing encouraging results from a high resolution 2D seismic survey in 1994 and exploration tax incentives. Chevron holds 100% interest in Blocks 56/14, 15, and 19, where two wells were drilled in the 1970s by Gulf Oil Ireland. Its wildcat will target Triassic oil prospects underlying the Cretaceous and Jurassic sands Gulf probed.
Look for privatization of Italy's state owned energy holding company ENI to begin as early as June.
New Italian Premier Lamberto Dini this month said ENI can be privatized as a whole entity, not in parts. That means earlier plans to privatize only the most attractive parts of the group-Agip, Agip Petroli, and Snam-have been scrapped. The Italian Ministry of the Treasury says a third of the stock issue could hit international markets during June-September.
U.S. companies are expected to be among the first buyers, sources say, citing a review under way of ENI financial statements according to U.S. accounting practices. Dini estimated ENI assets at $30 billion.
ENI in recent years has dismantled 100 noncore subsidiaries, cut its work force by 35%, and sold $2.5 billion in assets while restructuring management.
ENI profits in 1994 totaled more than $1.56 billion against $3.38 billion in revenues. The return to profitability of debt ridden Enichem and sale of other highly leveraged assets have boosted ENI's value by $1.25 billion.
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